First time buyers better off purchasing than renting

New research from Santander Mortgages suggests that the vast majority of potential first-time buyers would be better off buying a property than continuing to rent. In every part of the country other than London, average monthly rental prices now exceed those for the average mortgage repayment.

According to the bank’s research, would-be buyers currently renting outside of London could save themselves an average of £1,040 a year if they were able to own their own property. The average monthly rent in the UK (excluding London) is currently just over £420 compared to monthly repayments of £334 for the average first-time buyer – equating to an average saving for homeowners of £86 a month.

Only those in the capital will be better off if they continue renting. Despite rental prices in London being roughly 56% higher than the average across the UK, at £701 a month, exceptionally high house prices mean it would, on average, cost potential first-time buyers an additional £359 a month to buy.

The research into typical first time buyer flats and terraced properties found the average price across the country to be £115,657. This means that a first-time buyer, applying for a 75% loan-to-value mortgage (the average LTV for first-time buyers according to the Council of Mortgage Lenders) would require a deposit of £28,914.

Phil Cliff, director of mortgage marketing at Santander UK said: “People have been justifiably cautious in approaching the housing market in recent months but this research strongly supports the idea that in the majority of cases owning can be less expensive than renting.

“The now ‘average’ LTV of 75% for first-time-buyers has provided an obstacle in some cases but saving for a deposit is clearly a wise move. Lenders are also looking to offer higher LTV products while the Government’s announcement that it will help boost the number of new homes is all positive news for those wishing to take their first steps on the property ladder. As the ‘Home of UK mortgages’ we were the first lender to increase our maximum first-time-buyer LTVs on apartments and houses to 80% and 90% respectively, demonstrating our continued commitment to the first time buyer market.”

Second Homes

If you or your husband / wife or any other party to this transaction own any other properties, you might have to pay a higher rate of Stamp Duty Land Tax (SDLT).

Property owners purchasing an additional property to their main residence in England, Wales and Northern Ireland will be affected by the rise in SDLT.
If you already own properties but plan to buy a permanent home to replace another, you are exempt from the paying the higher rate.

If you own two properties on the day of completion of the purchase of your second property but still legally own your first property and plan to sell, you are still obliged to pay the higher rate of SDLT.
A refund is available if you sell your former residence property within 36 months.

First Time Buyer

A first time buyer is defined as an individual or individuals who have never owned an interest in a residential property in the United Kingdom or anywhere else in the world and who intends to occupy the property as their main residence.

Property Tenure Type

There are two fundamentally different forms of legal ownership: freehold and leasehold.
If you own the freehold, it means that you own the building and the land it stands on outright.
With Leasehold, you own the lease from the freeholder (sometimes called the landlord) to use the home for a number of years.